Tax avoidance: Prestige, loopholes, and the price we all pay

Hello Professional UK! We are C & B Partners Limited and we are pleased to have joined your organisation. By way of an introduction, we thought we would share our latest company LinkedIn Post we you all. It is part of a larger series about tax avoidance in the UK.  Enjoy!)

In the UK tax system, avoidance remains legally distinct from evasion—but the distinction is often misunderstood, and its consequences widely felt.

At C & B Partners Limited, our forthcoming YouTube will contain a series examining how tax avoidance schemes operate, why enforcement remains constrained, and what this reveals about structural inequity in the UK tax system. This article is a summary of a longer blog on our company website - UK tax avoidance - the tax divide.

Beyond legality: The engineered ambiguity of avoidance
Tax avoidance exploits complexity. Some of it resides in grey zones—where legislation lacks clarity, and enforcement is burdened by procedural hurdles. While HMRC estimates the total UK tax gap at £46.8 billion (2022–2023), which represents 5.3% of total theoretical liabilities, a portion is directly attributed to avoidance, including mass-marketed schemes targeting high earners.

These schemes are not hidden. They are actively promoted under banners of “efficiency” and “compliance”—yet often breach both the letter and spirit of tax law. When they collapse, it is clients, not promoters, who face the consequences: litigation, penalties, interest, and reputational harm.

The adviser gap: Prestige without protection
Unlike other professions, UK tax advisers are not subject to mandatory regulation or qualification. This lack of oversight creates risk: clients may enter complex arrangements under false assurances of legitimacy. Once HMRC intervenes, the reality is clear, clients are left to defend structures they did not fully understand, with little recourse to those who sold them.

Multinationals vs. SMEs: Two systems, one standard
While the distinction presented here captures the underlying contrast, for brevity of this post, it is necessary to simplify what, in practice, is a highly technical and nuanced area of tax planning. SMEs typically operate within a clearly defined domestic framework—making use of allowances, pension contributions, and dividend strategies that align with established tax policy intent and statutory design.

Multinational corporations, by contrast, engage in multi-jurisdictional structuring that draws upon advanced legal, economic, and transfer pricing principles. These include intellectual property ownership strategies, intra-group royalty arrangements, and cross-border cost allocation—all calibrated to navigate complex international tax frameworks, sometimes testing these frameworks aggressively. Though the essence of the comparison remains accurate, the underlying mechanics reflect a level of technical sophistication and strategic depth that extends well beyond surface description.

The disparity in enforcement outcomes between SMEs and multinationals is substantial and structurally embedded. SMEs typically face formal compliance checks or direct HMRC intervention, with limited scope for negotiation or discretionary resolution. By contrast, large multinational corporations often enter into negotiated settlements—sometimes through advance pricing agreements or structured dispute resolution frameworks—which, while procedurally valid, operate within a markedly different enforcement environment.

This divergence was brought into sharp focus by the UK’s 2016 settlement with Google, valued at £130 million. When compared to France’s €1.6 billion resolution for tax relating to similar periods and commercial activities, questions of consistency, proportionality, and public accountability quickly emerged. The episode illustrates not only differing national enforcement strategies, but also a broader concern about fairness and equal treatment under the tax system.

This is a critical point. Amid all the debate, involving academics, professionals and intellectual, about scale, legality, and the ethics of tax avoidance, one issue often escapes full attention: the growing perception that the system favours large, powerful corporates at the expense of everyone else. That underlying sense of imbalance doesn’t just threaten compliance—it corrodes trust. In the current cost‑of‑living crisis if the perception is that cooperate size and influence shapes outcomes—rightly or wrongly—while others bear the cost, the principle of fairness begins to fracture. As trust deteriorates, unresolved questions around legitimacy, equity, and the disproportionate power of global corporates exert a corrosive view on the fairness of taxes, and the system itself.

Barriers to enforcement: More than just legal complexity
While frameworks such as DOTAS and POTAS are in place, they offer limited tools for rapid enforcement. Many schemes continue unchecked for years, protected by procedural complexity and well-resourced legal resistance. Political caution further complicates matters. Governments often hesitate to act decisively—not only due to legal and technical complexity, but also because of the delicate balance between being seen to respond and avoiding reputational fallout, economic disruption, or job losses—particularly when major employers are involved.

Public sentiment: The morality gap widens
Legality is no longer sufficient. Public attitudes have evolved: “Is it fair?” has replaced “Is it allowed?” Austerity, visible inequality, and declining institutional trust have sharpened scrutiny of a system that appears gentler on the powerful.

The real test: Institutional will and cultural appetite
My experience has shown that ultimately tax authorities are only as effective as the political and cultural environments in which they operate. While they may possess the tools, without adequate political resolve, they cannot unilaterally redress systemic imbalance. The UK’s network of overseas territories and dependencies, as tax havens add to the complexity.

What next?